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The car will need maintenance the rdyear worth and the year

P/Y = 12

PV = $325,000

2. A 30 year variable rate mortgage offers a first year teaser rate of 3%. After that the rate starts at 5.5% adjusted based on actual interest rates. If the mortgage is $325,000 compute the monthly payment during the second year,if the interest rate increases to 5.5%. 

$1831

FV = 0

PMT = ? = $1,370.21

N = 29*12 = 348

FV = 0

I/Y = 3.99%

N = 5*12 = 60

4. Peter buys a car worth $22,000 by putting a down payment of 30% and taking a loan for the balance amount. The loan carries an interest rate of 5.99% over a period of 3 years and needs to be paid on a monthly basis. What is the total interest Peter is expected to pay over the life of the loan?

Approximately $1,464

PMT = ? = $468.43

2nd AMORT to get total interest paid on car

I/Y = \4.99%

N = 5*12 = 60

6. Consider a 15 year fixed rate mortgage for $175,000 at nominal interest rate of 8%. If the borrower wants to pay off the remaining balance on the mortgage after making the 9th payment, what is the remaining balance on the loan? Assume monthly payments.

$170,325

PMT = ? = $1,672.39

2nd AMORT to get balance after the 9th month

I/Y = \8%

N = 20*12 = 240

8. Consider a loan of $175,000 at nominal interest rate of 4.65% for 30 years. How much of the payment during the first year goes towards principal? Assume monthly payments.

$2,749

PMT = ? = $902.36

2nd AMORT to get total principal during the 1st year

I/Y = \8%

N = 30*12 = 360

10. Consider a loan of $220,000 at nominal interest rate of 4.65% for 10 years. How much of the payment during the first year goes towards principal? Assume monthly payments.

$17,696

PMT = ? = $2,295.99

2nd AMORT to get total principal during the 1st year

PV = $28,000 N = 5*12 I/Y = 4.99% FV = 0 PMT = ? = $528.27

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Sales Tax $28,000*.06 = $1,680
Maintenance Cost $525 $825
Annual Payments $528.27*12 = $6,339 $6,339 $6,339 $6,339 $6,339
Cost of Owning $1,680 $6,339 $6,339 $6,864 $7,164 $6,339
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Rent - $5,400 $5,400 $5,400 $5,400 $5,400
+ Residual Value $9,800
- Cost of Owning $1,680 $6,339 $6,339 $6,864 $7,164 $6,339
Ownership Operating Advantage ($1,680) ($939) ($939) ($1,464) ($1,764) $8,861

12. Calculate the cost of Owning this car in year 1.

Leasing since IRR is 9.29%

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Rent - $450*12 = $5400 $5400 $5400 $5400 $5400
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Residual Value $28,000*.35 = $9,800

PV = $28,000 N = 5*12 I/Y = 4.99% FV = 0 PMT = ? = $528.27

14. Calculate the expected house price at the end of year 5. 

$248,910

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Down Payment $20,000
Opportunity Cost of Down Payment $20,000*.05 = $1,000
Maintenance $1,500
Insurance $1,200
Property Tax $5,500(1-.20) = $4,400
Total $20,000 $8,100 $8,100*1.025 = $8,303 $8,303*1.025 = $8,511 $8,511*1.025 = $8,724 $8,724*1.025 = $8,942

16. Calculate the Post tax Mortgage Cost (principal repayment plus after tax interest cost) for year 1.

$42,896

Year 4:            P1 = 4 P2 = 4, arrow down til INT = $2945; PRN = $41,351

Year 5:            P1 = 5 P2 = 5, arrow down til INT = $1498; PRN = $42,798

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Rent - $950*12 = $11,400 $11,400*1.025 = $11,685 $11,685*1.025 = $11,977 $11,977*1.025 = $12,276 $12,276*1.025 = $12,583
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Rent - $11,400 $11,685 $11,977 $12,276 $12,583
+Selling Price $248,910
- Mortgage Cost $42,896 $43,158 $43,428 $43,707 $43,996
- Cost of Owning $20,000 $8,100 $8,303 $8,511 $8,724 $8,942
Total ($20,000) ($39,596) ($39,776) ($39,962) ($40,155) $208,555

18. Calculate Ownership Operating Advantage in year 4.

($40,155)

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Rent - $950*12 = $11,400 $11,400*1.025 = $11,685 $11,685*1.025 = $11,977 $11,977*1.025 = $12,276 $12,276*1.025 = $12,583

Selling Price:

PV = $220,000 N = 5 I/Y = 2.5% PMT = 0 FV = ? = $248,909.81 = $248,910

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
After Tax Interest Cost - $7000*(1-.20) = $5600 $5695*(1-.20) = $4556 $4344*(1-.20) = $3475 $2945*(1-.20) = $2356 $1498*(1-.20) = $1198
Principal Repayment $37,296 $38,602 $39,953 $41,351 $42,798
Post Tax Mortgage Cost $42,896 $43,158 $43,428 $43,707 $43,996
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Down Payment $20,000
Opportunity Cost of Down Payment $20,000*.05 = $1,000
Maintenance $1,500
Insurance $1,200
Property Tax $5,500(1-.20) = $4,400
Total $20,000 $8,100 $8,100*1.025 = $8,303 $8,303*1.025 = $8,511 $8,511*1.025 = $8,724 $8,724*1.025 = $8,942
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